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GAO to CoC: Here to conduct analysis of economy, not make recommendations

Fri, 11/22/2013 - 4:38pm

The U.S. Government Accountability Office has made clear to the Chamber of Commerce that they do not make any recommendations in their impact study of the minimum wage hikes in American Samoa and the Commonwealth of the Northern Mariana Islands.

“We do our best to get a fair analysis and it's up to the decision makers in Congress to make the decision,” said Michael J. Simon, GAO’s senior analyst with the International Affairs and Trade division, during Wednesday’s meeting with Chamber members.

“Part of our analysis will be to apply the consumer price index data that we have for American Samoa and use that, essentially, to break the wage rate into identifying exactly if earning power has increased or decreased over time,” said Simon, adding that GAO will also attempt “to factor in the real purchasing power of the wages in American Samoa rather than just the straight dollar figure."

The meeting was called by the Chamber to get feedback from the private sector, which would be included in the next GAO impact study, with a draft report out in February next year followed by the final report released to Congress on April 1, 2014 — before the next wage hike takes affect Sept. 30, 2015.

Simon, accompanied by Jon Fremont, who is also a senior analyst with GAO, outlined the purpose of the report, which is mandated by federal law pertaining to minimum wage hikes for American Samoa and CNMI. The report also includes comments from government as well as the private sector thru meetings such as Wednesday’s gathering.

Questionnaires have also been sent to the public and private sector and a draft report is sent to governments of CNMI and American Samoa as well as certain federal agencies for feed back before the final report is issued.

The draft report is “restricted to people with a role to comment,” said Simon in response to a call by a Chamber member for the draft to be made available at the Feleti Barstow Public Library so the community can review and comment. Simon did acknowledge that such draft may end up being “leaked” out.

With the next wage hike set for 2015, some Chamber members wanted to know what GAO’s recommendation would be — or whether they would make a recommendation in their report, to which Simon responded GAO will only report its findings, not give recommendations, and the final report will be available to the public on the GAO website free of charge.

Chamber chairman David Robinson added the same has been true in previous reports, wherein no recommendations were made.

One of the questions asked of those in attendance at the meeting — whose verbal responses would be included in the report — was to rate the state of the local economy, to which members were in agreement that there has not been much improvement due to, among other things, no new businesses.

One member said the local economy is “extremely restricted” with the canneries the only economic backbone. Additionally, the government is going through a rough time with its revenues but at the same time moving to boost tourism development.

On the question of the larger concerns over economic development, the private sector members were in agreement that the greatest impact is the minimum wage hike, which resulted in the closure of one of the two canneries in 2009, while the remaining cannery, StarKist Samoa’s decision to remain here in the future remains questionable.

Also questionable, said one business owner, is the future of ASG government revenue collections.

One businessman pointed out the struggle of the tuna industry to compete with foreign countries, especially in the area of labor costs. Additionally, the negative impact of minimum wage in the past was cushioned by federal money through stimulus funds, tsunami recovery funds, and the Section 1602 low income housing program.

Members were also asked to comment on what impact they faced when the last wage hike was implemented in 2009, to which some members said the decision was to make necessary reductions in staff and this was not something taken lightly by the private sector, but there was no choice.

Robinson, who operates a local import business and is also chairman of the ASG Shipyard Service Authority, said with the first hike in 2007 there were many businesses who were able to accommodate it, but when the 2008 hike was imposed, businesses started looking at their operations — especially payroll — for reduction.

“I think the first one was probably ‘manageable’ — we didn’t like it; the second one became an aggravation,” he said adding that American Samoa is now hoping for a “moratorium” placed on future hikes.

Besides the minimum wage, one of the major influences in the “poor shape of the economy” in the territory is that there are “no new investments” into the territory, no new jobs being created. Robinson said the territory is faced with a high unemployment rate.

It was shared by a businessman that there is support for the minimum wage so that wage earners can provide for their families, but American Samoa has a different set of circumstances — with one major industry, the canneries — compared to the U.S. economy. Additionally, there needs to be a balance between the increase of minimum wage and a well developed economy.

It was suggested and echoed by other members to return the previous practice of raising minimum wage through a special, federally appointed committee that reviews local economic conditions every two years and then makes recommendations on whether or not to hike wages in the 18-different minimum wage categories.

At the end of the one-hour meeting, comment sheets were given to members as well as an email address for others in the private sector who wished to email their comments: minimumwage@gao.gov

Yesterday morning the GAO officials met with the Commerce Department and Treasury Department, including the Tax Office.